1.

Which of the following statements is FALSE?

A.If XYZ Corp's $1,000 8% bond with 10 years to maturity is selling at $960, the yield is less than 8%.

B.Prices of longer maturity bonds are more sensitive to interest rate changes.

C.Simple interest is charged on bank bills while compound interest is applied on bonds.

D.A bond with a coupon rate of 10% and yield of 12% will sell at a discount.

2.

AA Co. has just paid a dividend of $0.52. Next year's dividend is expected to be 15% higher, after which the dividend will remain the same indefinitely. Assuming shareholders require a rate of return of 20%, what is the price of the stock today?

A.$11.96

B.$2.60

C.$2.99

D.$10.40

3.

Which of the following statements is FALSE?

A.The perpetuity formula gives the present value of an infinite stream of dividends is valued at the same point in time as the first dividend.

B.If all earnings are paid out as dividends, DPR is 1.

C.The usefulness of a vaulation multiple will depend on the nature of the differences between firms and the sensitivity of the multiples to these differences.

D.(V₀)/(EBITDA₁) is an Enterprise Value Multiple.

4.

Growing Real Fast Company (GRF) is expected to have a 25 percent growth rate for the next four years (affecting D1, D2, D3, and D4). Beginning in year five, the growth rate is expected to drop to 1.2 percent per year and last indefinitely. If GRF just paid a $4.00 dividend and the appropriate discount rate is 18.5 percent, then what is the value of a share of GRF? Enter your answer to two decimal places.

5.

Calculate the price of a 5-year $100,000 8% government bond that pays interest semi-annually, if the required market yield is 6% p.a. compounding semi-annually.

A.$105,428.20

B.$98,542.90

C.$103,586.85

D.$108,530.20

Thank you very much